Mid-Term Business Plan 2017

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1 Mid-Term Business Plan 2017 ー Shifting to a holding company system ー May 8, 2018 Mitsui E&S Holdings Co.,Ltd.

2 Table of Contents 1. Mitsui E&S Group's 2025 Vision 2. Roadmap to Business environment 4. Mid-Term Business Plan ) Our target and key strategy 2) Business foundation 3) Group management 4) Group synergy 5) Function and role of holdings (HD) and operating company (OC) 6) Target for FY2019 2

3 1. Mitsui E&S Group's 2025 Vision What we want to be? A group of professional engineers to pursue the innovation of values for our better society Marine Logistics & Transportation (25%) Social & Industrial Infrastructure (20%) Profit target of FY2025 Aim for net sales of 1,100 billion Yen and ordinary profit ratio of 6.0% in three core business domains 1. Environment & Energy (50%) 2. Marine Logistics & Transportation (25%) 3. Social & Industrial Infrastructure(20%) Environment & Energy (50%) 3

4 2. Roadmap to 2025 Net sales (billion) Ordinary profit ratio (%) MBP14: Basis Development MBP17: Revolutionary Change MBP20: Significant Advance MBP23: Accomplishment of the Goal 12,000 1,200 10,000 1,000 8, , MBP14 MBP17 MBP20 MBP23 Roadmap to % 6% 5% 4% 3% 4, % 2, % % Fiscal Year We are executing MBP17 in the phase of Revolutionary Change to achieve 2025 Vision Improvement of profitability is a key success factor 4

5 2. Business Environment General - In the medium to long term, market expansion expected by economic growth in emerging countries and development of advanced information society - In the short term, uncertain outlook of global economy, including forming economic blocs and slowing down of growth in emerging countries - Increased volatility in exchange market and in the field of resources and energy industry - Due to the evolution of IT (IoT, AI technology), sharing economy market is expected to grow rapidly Environment & Energy - Offshore oil and gas development projects: Predicted increase again in the medium to long term - Electricity and other energy: Demand increased driven by development in emerging countries - Renewable and clean energy: Demand continued due to increasing awareness of environmental issues Marine Logistics & Transportation - Shipbuilding, marine engine and equipment : Prolonged severe price competition due to decline in new shipbuilding demand - Container Cranes: Increased demand in Southeast Asia, Latin America, etc. including its renewal and upgrade - Maintenance, inspections and upgrades : Continued strong demand for environment, energy saving and life extension related, even under uncertain outlook of global economy - Gas products: Increased demand due to global shift to the clean energy Social & Industrial Infrastructure - Industrial machinery: Increased demand for upgrades and renovations despite continued weak demand in new construction - Public works projects: Growth in demand including large-scale upgrades and renovations amid full-scale implementation of measures to address deteriorating infrastructure - Defense and security: As security measures in the surrounding seas, the importance of preparation and maintenance of naval vessels and government vessels increases 5

6 1) Our target and key strategy - Target of Mitsui E&S Group at MBP17 - Improvement and stabilization of the profit by maximizing synergy of the group Key Strategy 1 Improving added value of products & services Product uniqueness Key Strategy 2 Reforming structure of manufacturing & EPC Cost competitiveness Key Strategy 3 Expanding & enhancing ancillary services Stable Profit Enhance planning and proposal capabilities Enhance product development capabilities Build a swift and flexible production system Build up a flexible EPC execution system Expansion of service domains and areas Evolution of services using IoT ー Group management ー Business foundation ー Taking advantage of the demand opportunities for energy saving, environmental response (clean energy) and infrastructure renewal with the strength of synergy and value chain of the group 6

7 1) Our target and key strategy (Action) Enhancement of business foundation Robust group management Execution of strategy Holding company system Start on April 1 st, 2018 Maximize group synergy by balancing the centripetal force of HD and the centrifugal force of OC Accelerate shifting to the next generation of business models by enhancing coordination with both inside and outside of the group Product uniqueness Cost competitiveness Stable profit Target of MBP17 improve profitability and stabilize profit Building up firm foundation with Enhancement of business foundation and Robust group management, to accelerate execution of each strategy for the achievement of MBP17 7

8 2) Business foundation (Shifting to a holding company system) Challenges for Achieving MBP17 To establish the independent business units in the group to make their own profit by themselves with their own responsibility To build a flexible framework that can speed up the execution of strategies such as business selection and concentration, collaboration with other companies, development of M&A etc. To build up a flexible system with an impetus for structural change Shifting to a holding company system Mitsui E&S Holdings Co., Ltd. 8

9 2) Business foundation (New organization) Plan & execute group strategy Mitsui E&S Holdings Co., Ltd. Plan & execute business strategy Other subsidiary Kaji Technology Corporation Showa Aircraft Industry Co., Ltd. Burmeister & Wain Scandinavian Contractor A/S MODEC, Inc. Mitsui E&S Business Service Co., Ltd. Mitsui E&S Engineering Co., Ltd. Mitsui E&S Machinery Co., Ltd. Mitsui E&S Shipbuilding Co., Ltd. subsidiary subsidiary subsidiary To separate group management and business management with the clear definition of each organization, function, role and responsibility 9

10 3) Group management (Strategy of group management) Shareholders Meeting Mitsui E&S Holdings Co.,Ltd. Monitoring & Overseeing Function Compensation Advisory Committee Personnel Advisory Committee Board of Directors Board of Corporate Auditors Accounting Auditors Business Execution Function Chief Executive Officer(CEO) Group Internal Control Special Crisis Control Committee Auditing Department HD Management Meeting Group Management Committee Group Compliance Committee Total Risk Management & Internal Control Committee IT Control Task Force Subsidiary directly under holding company To establish "Group Management Committee" to discuss and make decisions on the management strategy of the entire group 10

11 4) Group synergy Mitsui E&S Holdings Mitsui E&S Shipbuilding Mitsui E&S Machinery Mitsui E&S Engineering MODEC BWSC Environment & Energy Offshore production & storage facilities for oil & gas (FPSO etc.) Gas power generating unit Offshore power generation Renewable energy O&M Marine Logistics & Transportation Merchant ship Marine diesel engine Gas fuel propulsion Crane After-sale service Social & Industrial Infrastructure Naval ship Patrol ship Industrial Machinery Bridge Social infrastructure Civil works of power plant Environmental infrastructure Petro-chemical plant Update & maintenance service To develop business by integrating the advantages of each group-company in three business domains 11

12 4) Group synergy Evolution of group management Core technology of group companies Alliances with companies inside & outside of the group Environment & Energy Participate in O&M project at renewable energy & power sector Started biomass power generation business Participate in new power generation domain Completed detailed design of MW gas power generation barge Create new ocean projects in sub-sea Confirmed the feasibility of surface type Methane Hydrate (MH) recovery Stable profit Product uniqueness Product uniqueness EPC / O&M know-how in domestic and overseas plants Know-how on offshore power generation, Gas technology Hydrate related technology, Comprehensive technical capabilities of marine structures Expand collaboration with MES-E, BWSC, MDT(alliance partner) Build value chain with strengths of BWSC, TGE, MDT(alliance partner) Participate in national projects with subsea drilling companies, resource energy companies etc. * MES-E : Mitsui E&S Engineering, TGE : TGE Marine Gas Engineering, MDT : MAN Diesel & Turbo 12

13 4) Group synergy Evolution of group management Core technology of group companies Alliances with companies inside & outside of the group Marine Logistics & Transportation Promote collaboration for construction of merchant ships Started negotiations for business alliance Expand engineering business in shipbuilding field Received orders for engineering business Provide total solutions for gas fuel engines Started sales of high pressure pump for FGSS Construction of automated terminal Received orders for automated cranes Product uniqueness Cost competitiveness Product uniqueness Product uniqueness Comprehensive engineering capability, Ship development capability, Gas technology Environmental technology, Production technology, Gas technology Remote operation & automatic operation technology, Terminal control technology Alliances with other company's shipbuilding domain Acceleration of collaboration between MES-S and TGE Enhance collaboration between KTC, MES-S & TGE Cooperation with domestic terminals and overseas mega terminals * MES-S : Mitsui E&S Shipbuilding, FGSS : Fuel Gas Supply System, KTC : Kaji Technology Corporation 13

14 4) Group synergy Evolution of group management Core technology of group companies Alliances with companies inside & outside of the group Social & Industrial Infrastructure Promote LSS business for special ships Received orders for new construction & repair works of special ships Ship model development capacity, Proposal and development capacity of special ship, Production technology Build a supply chain with companies inside & outside of the group Cost competitiveness Stable profit Increase maintenance business Received orders for construction works on replacing slabs of highways Stable profit Repair and reinforcement technology, radar exploration technology Enhance cooperation with PC / steel bridge manufacturers & inspection companies among group Developed composite search vehicle, combined with laser measurement technology of other companies * LSS : Lifecycle Solution Service 14

15 5) Function and role of HD and OC (Centripetal & centrifugal force) Strategy formulation from group management viewpoint Holdings (HD) Operation Company (OC) Centripetal force Group management Cross-company coordination among the group M&A and Business selection and concentration" Centrifugal force independence of OC Speed-up execution of strategy Flexible strategy in accordance with the changes in business environment Cash management in one group Implement strategy flexibly in a timely manner by allocating group s resources to the critical business domain 15

16 5) Function and role of HD and OC (Risk management) Risk management for improving profitability Holdings (HD) Operation Company (OC) Group governance system Audit of operating companies Specific responsibility on business development & its profitability Up-graded risk management system (establish internal control and audit organization) Reinforced project management system (establish project management department) OCs up-grade risk management system HD organizes overall group governance system 16

17 5) Function and role of HD and OC (Human resources) Human resource development strategy in the environment where the domestic population shrinks Holdings (HD) Operation Company (OC) Strategic human resource management (Job rotation among the group) Common training system (Improvement of skills and encouragement from personnel with different back ground) Development and allocation of human resources corresponding to business needs Multiple job experience for career development (Job rotation in OC) Development of multi-talented human resources who can work with leadership in various business fields 17

18 5) Function and role of HD and OC (R&D) Clarify the role sharing between Holdings and operating companies Holdings (HD) Cross-company coordination Share & utilization of R&D achievements Mid- and long-term R&D strategies Maintenance and reinforcement strategy for common basic technologies Operating Company (OC) Enhancement of business Technology development as per business plan Maintenance and reinforcement strategy for specific technologies used in their business and products R&D institution: Responsible for enhancement of common basic technologies and new technologies Akishima Laboratories (Mitsui Zosen) Inc. Mitsui E&S Technical Research Co.,Ltd. Focus on the selected R&Ds critical for social issues and needs Not only the usage of our own internal resources, but also the collaboration with outside parties 18

19 6) Target for FY Consolidated profit & loss (Billions of Yen) Target FY2019 Net Sales 920 Ordinary Profit 37 Ordinary Profit Ratio 4% ROIC 6.5% Interest-bearing Debt 270 or less Assumed Exchange Rate 105 JPY/USD 19

20 6) Target for FY Consolidated investment plan (Billions of Yen) investment plan R&D investments 13 Facility investments 40 Financial investments 72 R&D investments Facility investments Financial investments Prioritize on innovation and improvement of profitability Prioritize on improvement of productivity and profitability Prioritize on structural reforms and profit stabilization 20

21 Transformation and evolution of business model through IT utilization Marine Development Production System 1 2 Ancillary Services 3 Join Team KUROSHIO Challenge undersea mapping which collaborates and operates unmanned offshore repeater and multiple autonomous underwater robots simultaneously Promote application of factory IT, such as participation in affiliated business of maritime productivity revolution (i-shipping) Marine Logistics Continue automation and remote monitoring of container terminals contributing to improvement of efficiency and reliability on cargo handling Started operation of nextgeneration engine condition monitoring system(cmaxs e-gicsx ) Preventive maintenance for main engine can be developed by diagnosis technology utilizing Big Data Quote source 1. Team KUROSHIO's website 2. Ministry of Land, Infrastructure and Transport website 3. ClassNK Consulting Service website Planning & Product development Design & Procurement Production & Construction Operation & Maintenance 21

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25 MITSUI E&S STARTING. A wellspring of new solutions. 25